Friday, June 26, 2015

Active rigs:

	6/26/2015	06/26/2014	06/26/2013	06/26/2012	06/26/2011
Active Rigs	76	192	187	214	170

RBN Energy: Canadian oil production.

The latest forecast from the Canadian Association of Petroleum Producers (CAPP) was published a couple of weeks ago. In spite of lower crude prices CAPP continue to forecast growth in Canadian crude output to 2030 – albeit at a slower pace than previously expected. Continued growth means that takeaway constraints getting Canadian crude to market remain a key challenge – even though increased use of crude-by-rail has taken up some of the slack. Today we conclude our review of the 2015 CAPP outlook.

CAPP is the voice of Canada’s upstream oil and natural gas industry. Their annual long-term outlook covers Canadian crude production, markets and transportation. In Part 1 of our review we covered the latest CAPP crude forecast – that is based on producer surveys. CAPP still expects Canadian production to grow between 2015 and 2030 even after the crude price crash in the second half of 2014. About 94% of Canadian production in 2014 came from Western Canada 62% of that is heavy crude from the oil sands.

The 2015 CAPP forecast includes 2 cases for oil sands production. Under the growth scenario total production is forecast to increase 1.43 MMb/d from 3.9 MMb/d in 2015 to 5.33 MMb/d in 2030 – about 1.1 MMb/d lower than the 2014 forecast. Under the “operating and in construction” scenario production growth between 2015 and 2030 only reaches 4.35 MMb/d –over 2 MMb/d less than the 2014 forecast. The biggest market for Canadian crude is U.S. refineries – that absorb nearly all exports. CAPP analysis of 2014 data shows that Canadian crude has achieved a 50% market penetration in the Midwest with far smaller shares of the East and West Coast markets. The largest opportunity for heavy oil sands crude remains the Gulf Coast – where Canadian barrels could potentially replace 2MMb/d of imports from other countries like Mexico and Venezuela. This time we review CAPP’s analysis of progress in overcoming the infrastructure challenges faced by Canadian producers in delivering their crude to new markets.

As they did in 2014 CAPP again recognize the growing importance of rail transportation in plugging gaps in crude takeaway capacity. The 2015 outlook provides a summary of rail terminal development and the take up of rail capacity to date. In 2014 crude-by-rail (CBR) volumes shipped out of Western Canada averaged 185 Mb/d. CAPP expects that to increase to 200 Mb/d in 2015 and 250 Mb/d by 2016. But the volumes moved by rail are still quite volatile since it is largely used as needed when pipelines are full. That means when crude production declines due to planned or unplanned shutdowns at production sites – crude by rail volumes drop off quickly.

However, CAPP predicts that if the Keystone XL pipeline were not in place by 2018, rail volumes would increase to between 500 and 600 Mb/d (and would decline if the pipeline is built). Based on CAPP’s survey the available Western Canadian rail load capacity is 776 Mb/d – more than enough to cover requirements over the next three years.  

 Tesla: GM's response over at Seeking Alpha.